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Step 1 in Bolivian Takeover: Audit of Foreign Companies
Published on Thursday, May 4, 2006 by the New York Times
Step 1 in Bolivian Takeover: Audit of Foreign Companies
by Juan Forero
 

SANTA CRUZ, Bolivia, May 3 — Bolivian authorities said Wednesday that they planned to scour the financial records of foreign energy companies and they threatened explicitly for the first time to seize company assets if new contracts giving the state greater control could not be negotiated.


Bolivian troops are guarding the properties of foreign energy companies. They searched cars Wednesday at the Transredes offices in Santa Cruz. (Noah Friedman-Rudovsky for The New York Times)
Wearing a hard hat and flanked by uniformed police officers, Andrés Soliz Rada, the energy minister, reiterated that multinational companies had six months to negotiate new contracts, many of which are likely to vastly increase the state's take.

"If the negotiations do not go well, we could go to the next step, expropriation," he said, adding that the companies would be compensated. But the first step, he said, is an audit of foreign company documents. "It's time to open the black boxes of the petroleum companies."

Mr. Soliz Rada held his news conference at a refinery run by Petrobras of Brazil, the company with the most to lose in Bolivia. Here, as at other private oil installations, military police guarded the entrances, searching cars to make sure no documents were being removed.

Bolivian officials said the briefing was intended to reassure foreign multinationals here, but it seemed to have the opposite effect, and the message was unmistakable: the government is now in charge, and the companies can take it or leave it.

Venezuela's president, Hugo Chávez, who dreams of uniting Latin America as a buffer to United States influence, arrived in La Paz on Wednesday night and congratulated Bolivia's new president, Evo Morales, on the nationalization.

As a first step, auditors from Petróleos de Venezuela, that nation's oil giant, visited three foreign companies in Bolivia and announced that they would be involved in the audits, an executive of one company said.

The Venezuelan company is also providing technical help to Bolivian authorities and is to sign a contract to build a gas separation plant.

Bolivian authorities seemed to underestimate the impact of the steps that Mr. Morales announced Monday, on their own government and on foreign companies, particularly for an impoverished country of just nine million people that is still far from being the energy giant it wishes to be.

Bolivia may have Latin America's second-largest gas reserves, but much of its riches are far from being developed. The landlocked country also has limited sales outlets.

It is a far cry from Venezuela, a major oil producer that has squeezed companies at will, with little chance that they will leave because of the huge profits to be made there.

"It's one thing to produce petroleum at $72 a barrel and have access to many markets, and it's another thing to produce gas that has only one market in the region, Brazil," said Carlos Alberto López, a consultant for foreign oil companies.

The decree puts the Bolivian government's energy firm, Yacimientos Petrolíferos Fiscales Bolivianos, better known as Y.P.F.B., front and center. Instead of a small auditing firm, Yacimientos would, under Mr. Morales's decree, become an equal partner with giants like Repsol YPF S.A. of Spain and Total of France.

In an interview, Jorge Alvarado, the president of the Bolivian company, who stood beside Mr. Soliz Rada at the news conference, admitted Yacimientos had no money. Asked how it would develop the country's gas fields if foreign investment evaporated, Mr. Alvarado said he was certain that foreign companies remained eager to continue in Bolivia.

"I want to be sincere," he said. "Y.P.F.B., because of the neoliberal model, has been reduced to a minimum. It has no economic resources. But we see that there is much interest by foreign companies that want to invest in the country."

Foreign companies, though, expressed increasing indignation.

Spain's prime minister, José Luis Zapatero, said the move could affect the amount of assistance Madrid provided to Bolivia, Agence France-Presse reported, and he is sending a delegation to La Paz to meet with officials.

Energy companies are considering international arbitration or court fights.

The Bolivian Chamber of Hydrocarbons, which represents the companies, said the decree could change the terrain for foreign companies for the worse. The chamber expressed concern that Bolivia was veering away from emphasizing the importance of contracts and investments.

"It is the point of view of the chamber that the companies will not have the incentive to continue developing hydrocarbons," Enrique Menacho, the chamber's president, said in an interview.

Petrobras, in a letter from its director in Bolivia to Mr. Alvarado, said that while the company would continue operating in Bolivia, it was worried about the decree, and he hinted that the company could take legal action to protect its investments.

Under the decree, the state would be entitled to 82 percent of production in the biggest fields, up from the less than 18 percent the companies first agreed to when they began developing the fields.

Yacimientos also would take a majority stake in three companies — Chaco, Andina and Transredes — that once were state-owned but are now run by foreign companies.

Petrobras also appears to be losing control of two refineries, including the one where the briefing was held.

On Thursday, Mr. Morales and Mr. Chávez are to travel together to Argentina and meet with President Luiz Inácio Lula da Silva of Brazil and President Nestór Kirchner of Argentina.

At the briefing, Mr. Alvarado and Mr. Soliz Rada offered assurances that current contracts with the state still enjoyed legal security. But at the same time, they highlighted the new measures as a sign of dignity and sovereignty, and complained about the lack of Bolivian employees at foreign companies.

"Give me the names of Bolivians in Transredes, in Chaco, in Andina," said Mr. Soliz Rada.

Bolivian officials also contend that foreign oil companies, which have invested upwards of $4 billion since 1997, have recovered their money.

It is an assertion that the companies deny. The Margarita field, for instance, operated by Repsol of Spain with its British partners, cost more than $300 million to develop.

"You're just now going on market," said one foreign executive here who has worked on the project, asking that his name not be used for fear that his relationship with the government would be damaged. "How can you say that the consortium has recovered their investment in Bolivia?"

Copyright 2006 The New York Times Company

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